Recently one of leading papers reported how BMC received almost 100 crores in the last few weeks from builders wanting to buy "FSI" ( floor-space index).At present the permissible FSI in Mumbai's suburbs is restricted to 2. ie the builder can build up twice the area of the land he possesses. So if he has 20000 sq ft of land, he could build up 40000 sq ft of property vertically.

Of this, 1 FSI is given free of cost for construction. The balance the builder has to buy. He could only buy it from the open market in the form of TDR certificates (transfer of development rights). The Rs 2,500 crore-a-year TDR market is controlled by a clutch of politically-connected developers. The entire construction industry in the suburbs was dependent on this TDR cartel. In a clever move the new Chief Minister Prithviraj Chavan cleared a proposal in Oct 11, that allowed the builder to buy upto 33% additional FSI directly from the state Govt.

This achieved two things1) The developer's dependence on the TDR market now is 33% less, 2) since the Govt's FSI is cheaper than the expensive TDR, so builders will quite naturally flock to get it.This will immediately affect the price of the final property as the current rate of slum TDR is in the region of Rs 2,500 a sq ft, but the premium paid to the BMC based on the ready reckoner rate worked out to a little over Rs 1,000 sq-ft..

A builder with a project in the eastern suburbs is believed to have saved Rs 18 crore by going for the government's FSI instead of completely buying 100% TDR. The premium is levied on the basis of the ready reckoner rate of land, which is fixed for different areas in the city. Hence in upmarket areas like Bandra, Powai etc the Govt rates would be higher than the TDR available from the open market.Builders hinted that property rates in suburbs could dip if the Govt FSI rates turns out to be cheaper than TDR prices.

The BMC too is smiling as the BMC and state government estimate they will both earn over Rs 1,000 crore annually from developers who want to utilize this additional FSI. This windfall they promise will be utilized to augment the city's infrastructure. So this move could infact bring down the soaring rates for home seekers and at the same time rake in moolah for the BMC & state Govt.. But then.... the big "IF" is.... will the builders pass on this benefit to the customers or simply use it now to earn even more !!!

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Masss was pioneered by C Fernandes.He has more than 15years in offering Sales Support services to various leading Companies who offer their wares to the ConstructionIndustry. He specializes in Surveys~Data~Research